Triple-A rated Palo Alto will take bids for $58.5 million of Series 2010A general obligation bonds on Wednesday.
In assigning an Aaa to the bonds Moody’s Investors Service said the rating reflects the city’s economic strength given its location in the heart of the Silicon Valley and the presence of Stanford University. High wealth and income levels, strong financial management, adequate financial flexibility, and low debt levels contributed to the ratings.
The city, home to electronics, computer hardware and software, and biotech firms, is also an important retail center. Large employers in the area include Hewlett-Packard, Sun Microsystems, and Lockheed Martin. Stanford University, the largest taxpayer in the city, represents 17.2% of total assessed values in 2010.
Though Palo Alto’s revenue base has had a history of steady growth, annual general fund surpluses and growing reserves, during the recent economic downturn, this trend appears to have been broken in the current year. The city’s revenues are likely to fall short of the budget by about $4 million or about 3.5%. Expenditure cuts may not have been sufficient to offset the lower revenues, Moody’s said.
Standard & Poor’s also assigned a AAA to the deal.
Stone & Youngberg is financial adviser. Jones Hall is bond counsel.